* ECB, BoE opt to hold rates as expected
* Dollar firms on euro zone debts woes
* SPDR gold ETF reports fresh 1.6-tonne outflow
(Updates prices, adds ECB decision)
By Jan Harvey
LONDON, Feb 4 (Reuters) - Gold prices retreated towards
$1,100 an ounce in Europe on Thursday as the dollar rose to a
seven-month high against the euro on concerns over debt problems
in euro zone economies Greece, Spain and Portugal.
The euro held earlier losses and Bund futures were little
changed after the European Central Bank kept interest rates at a
record low 1.0 percent in a move that was widely expected by
market participants. []
Spot gold <XAU=> was bid at $1,104.30 an ounce at 1316 GMT,
against $1,108.85 late in New York on Wednesday. U.S. gold
futures for February delivery <GCG0> on the COMEX division of
the New York Mercantile Exchange fell $7.20 to $1,104.20.
The prospect of further gains in the dollar, which would cut
gold's appeal as an alternative asset and make dollar-priced
commodities more expensive for holders of other currencies, is
seen as a risk for precious metals this year.
"We are looking at the likelihood of dollar strength this
year, primarily based on Fed (monetary policy) tightening," said
Deutsche Bank's head of research Michael Lewis.
"On the forex side we have a target of 1.35 on the
euro/dollar, and that is the reason we are slightly bearish on
precious metals," he added. "We are not imagining a significant
correction, but this is a dollar story."
Following its decision on rates, the European Central Bank
is expected to hold off until March before looking at further
unwinding its crisis support measures. []
Traders are awaiting the outcome of a press conference with
ECB president Jean-Claude Trichet, due to begin at 1330 GMT.
Earlier the Bank of England announced no increase to its 200
billion pound ($317.5 billion) asset-buying programme after its
monetary policy meeting, halting the scheme after 11 months, and
left UK interest rates at a record low of 0.5 percent.
[]
OIL, EQUITIES DECLINE
Among other commodities, oil prices fell towards $76 a
barrel as rising crude inventories in the United States weighed,
while base metals were pressured by the firmer dollar. Gold is
sometimes bought as a hedge against oil-led inflation. []
On the wider markets, European shares were lower in early
afternoon trade as jitters over the health of some euro zone
economies weighed, reflecting earlier losses in Asia. U.S. stock
futures pointed to a lower open. [] []
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD> reported its first outflow this
month on Wednesday. Its holdings declined 1.6 tonnes that day,
after falling 21.7 tonnes in January. []
Wholesale gold buying in India, historically the world's
biggest gold consumer, remained dull on Thursday afternoon as
traders awaited a further fall in prices. []
Elsewhere silver <XAG=> was at $16.17 an ounce against
$16.34, platinum <XPT=> was at $1,552 an ounce versus $1,572.50,
and palladium <XPD=> at $430 versus $434.50.
Palladium was the best-performing precious metal last year
as rising investment and hopes for a recovery in buying by the
car industry -- which accounts for more than 50 percent of
global demand for the metal -- lifted prices.
"We continue to be of the opinion that large dips towards
the $400 an ounce mark present good opportunities for industrial
end-users to cover their future requirements," said precious
metals house Heraeus in a weekly report.
(Editing by Anthony Barker)
